Question
Most of Australia's coal-fired power plants are running at a loss as electricity prices continue to slide, battering the profits of energy giants AGL and
Most of Australia's coal-fired power plants are running at a loss as electricity prices continue to slide, battering the profits of energy giants AGL and Origin and sparking warnings from within the industry of earlier-than-expected plant closures. An influx of renewable energy has been driving down daytime electricity prices and piling enormous pressure on the nation's fleet of coal-fired power stations, which are far more expensive to operate and, increasingly, struggling to compete. New figures reveal baseload electricity prices in Victoria crashed 70 per cent from about $80 a megawatt hour in March 2020 to $24 this month... Price falls across the nation's main grid have been driven largely by the pandemic-led downturn in energy demand, a cooler-than-usual summer and the accelerating rollout of rooftop solar panels. While demand is recovering, the flood of cheap renewable energy continues. With four gigawatts of new wind and solar already committed to enter the grid between 2021-23 and state governments in Victoria and NSW mapping out ambitious pro-renewables policies, investment bank UBS is projecting a 'huge uplift' in renewable penetration that could keep prices depressed.'
a] (1 point) Use the demand/supply model and information in the attachment to explain why daytime electricity prices have decreased.
b] (2 points) Use the model of a firm operating in a competitive market to show how a decrease in the price of daytime electricity could cause suppliers with relatively high costs of production to need to exit the market.
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